Shares of Dutch digital payments company Adyen NV (ADYEN.NL) are losing mightily today as its H1 2023 earnings report fell short of market expectations. Growing competition in North America contributed to the slowest revenue growth since the ICO, which was the reason for the company's nearly €12 billion capitalization being wiped out in a single session today. The company was trading at a sizable premium on the valuation side against competitors such as PayPal (PYPL.US) and Block (SQ.US). After the Q2 report, investors are adjusting valuation to lower growth metrics (H1 2022 revenue grew 37% y/y). The company brokers payment services from giants like Meta Platforms, Microsoft and Netflix.
- 2023 H1 revenue was €739.1 million (21% y/y growth, below Refinitiv's forecasts, which estimated 40% y/y growth to €853.6 million
- EBITDA amounted to €320 million resulting in a 10% y/y decrease from €356.3 million in H1 2022 - in line with analysts' expectations. Adyen reported that inventory write-downs weakened EBITDA by €6.3 million.
- The company cited wage pressures, increased headcount and shifting business priorities in the US and Canada. Adyen benefited in pandemonium from high demand for digital payments and e-commerce during the COVID period and maintains its status as one of the largest fintechs in Europe;
- However, the higher interest rate environment is reducing the attractiveness of growth companies in the industry, whose opportunities typically depend on the intensity of trading and customer cash holdings;
- Adyen records profits mainly on the negligible portion of transactions charged to e-commerce merchants' bank accounts - however, the market is pricing in the risk of shrinking margins in the face of strong competition and an uncertain macro outlook by which, after the report, the valuation at P/E 60 was not able to 'defend itself'.
Adyen (ADYEN.US) shares are overvalued by nearly 30% today, falling below important support levels. The important price level set by previous price reactions may turn out to be EUR 900 - the local peaks of 2019. Source: xStation5
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